Fund advice needed for newbie!

skillboy

anyone?!

can you give some examples of a multi-asset fund that you would consider investing in?

skillboy

Would the Vanguard Life Strategy funds fall into this category?

ExMugPunter

Yes it would.

I am also quite new to this investing game and I am not as clued up as many on here but, If I were you I would seriously think about starting with everything in the lifestrategy 60 in order to give you a solid base.

Then when you are absolutely sure about the direction you want to go, add something else like an emerging markets or small caps tracker depending on your preferences.

As far as I can tell, the key to this investing lark is to decide what you want and stick with it for the long haul. Its the chopping and changing of your portfolio and the buying and selling of funds that will kill your returns.

The Vanguard Lifestrategy products will give you a pretty solid starting point to build on.

bowlhead99

skillboy wrote: »

Would the Vanguard Life Strategy funds fall into this category?

Yes, though the '80% equity' version is the only one that has at least two different asset classes (i.e. debt as well as equity) and a full spread of easily-visible geographic regions for equities; the 60% and 40% versions of the LS funds simplify their regional allocation of equities to UK index/ex-UK index/EM index.

A competitor which has a similar approach (constructing a global portfolio of index funds within one fund, to create a cheap product) is the Blackrock Consensus funds. The Consensus 85 has up to 85% of its assets in equities at a point in time although has flexibility to take lower equity exposure when equities are considered to be on less of a bull run.

Or you could get one made of more actively managed funds
like this one from Old Mutual (picked at random, not a recommendation). As you can see from the link, as of a couple of months ago its top 10 holdings were:

OLD MUTUAL NORTH AMERICAN EQUITY A ACC 14.00
OLD MUTUAL UK EQUITY A ACC 10.80 2 * -
OLD MUTUAL UK DYNAMIC EQUITY A GBP 10.50
OLD MUTUAL ASIA PACIFIC A ACC 9.20
OLD MUTUAL GLOBAL EQUITY ABSOLUTE RETURN R HEDGED ACC GBP 9.00
OLD MUTUAL EUROPEAN EQUITY (EX UK) A ACC 8.10
OLD MUTUAL UK EQUITY INCOME A ACC 7.90
OLD MUTUAL MONTHLY INCOME BOND A ACC 7.20
OLD MUTUAL GLOBAL STRATEGIC BOND A ACC 6.50
OLD MUTUAL JAPANESE EQUITY A ACC 2.50
Total 85.70

By using a multi-asset/ mixed asset fund, you only have one holding but that holding has multiple positions rebalanced by the manager from time to time. Whereas in your original plan, you were just picking 5 sectors and presumably would then have to keep balancing them (e.g. your UK fund halved and your global tech fund doubled but you didn't want such a large portion in global tech vs UK).

You can get lots of information about fund performance and holdings from trustnet.com (the last link above for Old Mutual) or morningstar.co.uk. And there are investment trusts from a range of managers that invest globally across sectors and asset types. As dunstonh suggested earlier, instead of constructing a complex portfolio yourself you could simply use one of these (or even two or three of them if you want to spread out across different styles). Then when you have a bigger pot of money to play with, you could fine tune.

atush

skillboy wrote: »

Would the Vanguard Life Strategy funds fall into this category?

Look up two lol;)

Freecall

Linton wrote: »

One reason not to stick with a single global fund is for educational purposes. Experiencing the ups and downs of various sectors is far more valuable in my view than simply reading about it.

I think that this is an often overlooked point.

I would go even further and suggest that mistakes (and consequent loss of value) made during the early days of investing can ultimately prove valuable in the long term.

Education is never wasted and provided the cost incurred is proportionate to your overall investments then it can effectively be money well spent.

Glen_Clark

Is there any reason nobody has mentioned ETF's?
Vanguards have total annual charges as low as 0,09% (S&P 500), low spreads, no stamp duty, and can be held free of charge in X-O

bowlhead99

Freecall wrote: »

I would go even further and suggest that mistakes (and consequent loss of value) made during the early days of investing can ultimately prove valuable in the long term.

Education is never wasted and provided the cost incurred is proportionate to your overall investments then it can effectively be money well spent.

That's true, blow 10-20% of a few thousand pound portfolio (or even a 20k-50k portfolio) through recklessness, over-risking, selling when you should have held, holding on when you sould have sold, following 'gut feel' vs common sense, and breathing a sigh of relief that the 20% is not 40% because you had a lucky 'win' elsewhere... mistakes we'd rather not make but many of us have.

But better to make them in that early portfolio rather than have the same % gambles on a 100k- 500k portfolio that's intended to give us 40 years of retirement living.

It is easier to learn from your own mistakes than the mistakes of others. However obviously if you spend a few pounds on books and several hours reading them and the various internet sources, you can avoid making the mistakes in the first place rather than have the several thousand pounds of losses on your investing CV from trying to learn it the 'easiest way to learn'.

The drawback of 'experimental' investing rather than from listening to people on forums and well-written books is that it will either:

a) cost you a bunch of money or ;
b) it will make you a bunch of money through good fortune

Comparing the results:

a) gives you a useful lesson for the future but sets you back in your life goals.

b) teaches you that investing is easy and then you lose it back many times over with larger stakes that follow course a), and set you back in your life goals.

So, best to play with small stakes. The problem with playing small stakes is that they are inherently not very exciting if it doesn't hurt to lose or give you a feeling of success when you win.

Online casinos offer freeplay tables to get the hang of it. Inevitably if you play them you will either lose (and say to yourself "well obviously if this was real money I would have been more cautious, I can go ahead and gamble here.") or win (and think "this is easy money I can go ahead and gamble here"). Not a great learning tool really.

Similarly many brokers or platforms allow you to build a virtual portfolio or watchlist. You could waste a couple of years of your life 'practicing' and probably make or lose virtual money depending on the general direction of the market which will be different by the time you invest for real.

The difference between casino and stockmarket investing is that in the former, over time, however cautious or aggressively you play, the odds are on the casino's side and you shouldn't really play. On the stockmarket given enough time and a lack of recklessness, the odds are on your side and you should play.

So, get on and invest for real with your real money and for proper stakes, but safe in the knowledge that your 'real money' at age 20 is lower than it would be at 30 or 40 or 50 or 60.

Feel free to have a side fund that is your 'gamble' with a portion of your pot to follow an area in which you have great belief - whether that's tech, green energy, biotech, bio-pharma, mining and natural resources, brazil, russia, china, smaller companies in Asia, whatever. As you grow your pot to 10k or 20k maybe the higher-conviction element goes up to 2k or 4k or something.

But as the long-term odds are on your side if you simply follow a traditional balanced approach, you don't really need to complicate the core of your portfolio by building it out of 4-5 separate funds. That just encourages tinkering without changing the overall result too much one way or the other, and the returns in any few-weeks/months/years period will depend to an extent on luck anyway.

Freecall

bowlhead99 wrote: »

The drawback of 'experimental' investing rather than from listening to people on forums and well-written books

I wasn't suggesting that they are mutually exclusive.

My point was that losing a few quid from early mistakes need not be considered as all negative. I certainly made mistakes in the early days and looking back now feel that they gave me a lesson well learned.

I suspect that very few people simply read and research and then never make a mistake.

bowlhead99

Glen_Clark wrote: »

Is there any reason nobody has mentioned ETF's?
Vanguards have total annual charges as low as 0,09% (S&P 500), low spreads, no stamp duty, and can be held free of charge in X-O

To an investor like yourself with a large pot they can give you market exposure very efficiently. You could just dump cash into ETF trackers and create a portfolio straight away and spend a fiver or a tenner per ETF to buy and sell back to your target allocation each year.

Whereas for someone like OP just starting from scratch to build a portfolio, he would need to be buying say 5-15 of them with charges from 0.1% to 0.2% or more (the S&P500 is probably cheapest you can find), to be able to do what the blackrock consensus or vanguard lifestrategy ones do out of the box for 0.3% (plus platform fee).

As 0.1% saved on 1k invested is only £1, it would be swamped by the dealing costs of £5-£10 per (monthly?) addition per fund.

So, it's not usually suggested for newbies to start with a self-built portfolio of exchange traded funds, even though they can ultimately have a place in many portfolios. When your portfolio gets bigger and you want to fine tune exposure they can be more cost efficient / useful although there is of course the whole active vs passive debate done to death elsewhere.

As an example of why its a hassle to DIY via ETFs, here's an example of what Blackrock Consensus includes in the box.

BlackRock 100 UK Equity Tracker Fund
BlackRock Continental European Equity Tracker Fund
BlackRock Corporate Bond 1-10 Year Fund
BlackRock Corporate Bond Tracker Fund
BlackRock Emerging Markets Equity Tracker Fund
BlackRock Global Property Securities Equity Tracker Fund
BlackRock Japan Equity Tracker Fund
BlackRock Index Linked Gilt Tracker Fund
BlackRock Mid Cap UK Equity Tracker Fund
BlackRock North American Equity Tracker Fund
BlackRock Pacific ex Japan Equity Tracker Fund
BlackRock Overseas Corporate Bond Tracker Fund
BlackRock Overseas Government Bond Tracker Fund
BlackRock UK Equity Tracker Fund
BlackRock UK Gilts All Stocks Tracker Fund
BlackRock US Equity Tracker Fund

Clearly one may just be happy with the general market exposure from just a bonds tracker and a UK equities tracker and an ex-UK equities tracker. Or you might prefer to have different proportions of each of the components. So in those examples you could build it yourself and manually rebalance to your heart's content using ETFs. But if you're trying to simplify investments for a newbie who would want to avoid fixed costs of regular trading as the portfolio expands and gets rebalanced, I would just point them to a portfolio/multiasset fund or two.